How to Fuel the Country While Saving the World December 19, 2007 http://www.newsweek.com/id/80938 Memo to: The Next President of the United States From: Amory B. Lovins As you prepare your energy policy for the next four years, your advisers are probably offering you a depressing multiple-choice question that boils down to: "Since there are no alternatives to coal, oil or nuclear power, would you prefer to die of (a) global warming, (b) oil wars or (c) a nuclear holocaust?" Fortunately, there's another option: "(d) none of the above." Your advisers are wrong; there is an alternative. No one needs to die of America's energy choices after all. Moreover, the alternative is profitable, so society can implement it in mindful markets without government's having to force anybody. And it offers a realistic, nonpartisan path to a richer, fairer, cooler and safer world. To see how to get there, let's start with a riddle. Q: How is climate change like the Hubble Space Telescope? A: They were both messed up by a "sign error" - namely, a mix-up between a plus sign (+) and a minus (–). The telescope's mirror was ground in the wrong shape because a technician confused the signs. Similarly, the climate debate has for too long focused on who must pay how much (+) so we don't end up toast. But done right, protecting the climate and securing the country's energy supply are not costly at all. In fact, they're profitable, since saving fuel costs less (–) than buying it. As politicians debate the supposed "costs" of efficiency, smart companies have already discovered the reality. For many years, chipmakers IBM and STMicroelectronics have increased profits while cutting carbon emissions 6 percent a year. Du Pont emitted 80 percent less greenhouse gas in 2006 than in 1990, and at a $3 billion profit. Dow has booked a total of $3.3 billion by filling 22 percent of its energy needs with efficiency improvements. McKinsey & Co. now argues that the world could profitably abate 46 percent of global greenhouse-gas emissions by 2050 for virtually nothing, with nearly all costs offset by the huge savings they'd earn from improved efficiency. If you can explain this truth to Washington and the country, political resistance to climate protection will melt faster than any glacier. You should remind citizens that we're already headed in the right direction. In 2006, the United States used 48 percent less energy, 54 percent less oil and 64 percent less direct natural gas (i.e., that burned by customers, not power plants) per dollar of GDP than it did in 1975 - even though light-vehicle efficiency has been stagnant for two decades and almost all states reward utilities for selling more energy, not cutting customers' bills. Indeed, the United States saved more energy in 2005 than the European Union used. Imagine what more this country could do if it actually paid attention. For starters, it could lead the world to a profitable climate solution. Most economic theorists assume that global energy use per dollar of GDP will keep drifting down by just 1 percent a year. But if we could raise that figure to just 2 percent a year, we would stabilize carbon emissions; 3 percent a year would decrease them and soon stabilize climate change (unless the damage proves irreversible). Is a 3 percent annual cut realistic? Yes: the United States has beaten that target in four of the past 10 years, and in 2006 it achieved a 4 percent drop. Since this slightly exceeded growth in GDP, total U.S. use of energy, coal and oil fell slightly in 2006. Nobody noticed. China has beat 5 percent for 25 years; smart companies manage 6 to 9 percent. Moreover, everyone who's saving energy is making money. To understand why, you must first understand why releasing carbon by burning oil and fueling power plants - which each cause two fifths of global fossil-fuel carbon emissions - is unnecessary and uneconomic. Consider oil first. In 2004, my team prepared a detailed report for the Pentagon called "Winning the Oil Endgame," in which we explained how the United States could become oil-free by the 2040s - led by business for profit. U.S. oil efficiency could be redoubled at an average cost of just $12 per saved barrel. The economics are like buying fuel for between 7 and 15 cents per liter. The key is building trucks, cars and planes that achieve three times greater fuel efficiency than those in use today by integrating ultralight materials, better aerodynamics and tires, and advanced propulsion. Working with the auto industry, my team has designed a 67mpg (3.6L/ 100km) half-weight, ultrasafe, hybrid-electric SUV. It could be made of light metals or of even lighter and stronger carbon-fiber composites similar to those used in Boeing's fuel-sipping Dreamliner (which is sold out into 2015). The SUV could be made at a cost and pace comparable to current models by using simpler and cheaper techniques, which would cut automakers' costs by two fifths and save the United States so much oil it would be like finding a new, secure and inexhaustible Saudi Arabia under Detroit. In October, Toyota showed a carbon-fiber plug-in hybrid concept car with a third the weight and twice the efficiency of a Prius. Toray, the world's top carbon-fiber maker, announced a $3 billion factory to produce auto parts. Car buyers, dealers and autoworkers already crave such innovation, and automakers' survival demands it. Today's competitive tsunami will change the managers or their minds, whichever comes first. My team gets the business logic flowing by "institutional acupuncture" - sticking needles into congested cultural blockages. Our analysis led Wal-Mart to require doubled-efficiency trucks that will save it billions and take those trucks to market where everyone can buy them, ultimately saving 6 percent of U.S. oil, more than three times what the Pentagon uses. Displacing oil by reusing saved natural gas and advanced biofuels could fill the other half of U.S. oil needs at an average cost of $18 a barrel. This means that getting the United States completely off oil would cost only $15 a barrel (the average of $18 and the $12-per-barrel cost of enhanced efficiency) - a fifth of today's price. As you explain this to the nation and business leaders figure it out in the marketplace, competitive pressure will remove the need for new federal energy taxes, subsidies, mandates or laws. Still, innovative policies should be put in place to support rather than distort the business logic. For example, using "feebates" - fees on inefficient new cars, offset by rebates on efficient ones of comparable size - would benefit buyers, enrich carmakers and expand consumers' choices. As for electricity, more-efficient use could reduce the country's electricity needs by three fourths - and could be achieved more cheaply than simply running an already-built coal or nuclear power station. Energy-saving techniques are getting better and less expensive all the time. One example: my house in the Rockies, built in 1982–84, has since yielded 28 indoor banana crops despite having no furnace and outdoor temperatures that get down to -44 degrees C. Yet building such a heat-tight home actually decreased construction costs by $1,100. Reinvesting that sum, plus an additional $6,000, saved 99 percent of water-heating costs and 90 percent of household electricity plus 50 percent of water use, repaying the extra expense in 10 months (today it would be even cheaper). Pacific Gas & Electric has built experimental passively cooled houses with no air conditioning that remain comfortable when the outside temperatures spike up to 46 degrees C - and that are cheaper to mass-produce than regular houses. Similar savings can be found in industry; by redesigning more than $30 billion worth of facilities in 29 sectors to make them superefficient, my team has routinely made very large energy savings cost less than small or no savings. And these techniques keep getting better and cheaper. Another factor warrants your attention. A quiet revolution is underway in the way the world gets its electricity. "Micropower" - the cheap and efficient "cogeneration" of electricity and useful heat together in industry and buildings, plus making energy from renewable sources like the wind, the sun, the earth and small hydropower - emits little or no carbon and is sweeping the market. Micropower, mostly from private power providers but also many utilities, now produces a sixth of the world's total electricity (just beating nuclear power) and a third of the world's annual increase in electricity. In 2005, micropower added four times the global electricity and 11 times the capacity that nuclear added. In 2006, nuclear capacity lost half a billion watts while micropower capacity gained about 34 billion watts; decentralized renewables alone got $56 billion of private risk capital while nuclear got zero (only central planners buy it). And micropower and "negawatts" (saved electricity) together provided more than half the world's new electrical services. All the supposedly indispensable central stations put together - fossil, nuclear and big hydro - are losing market share due to their high financial costs and risks. In these ways, economics are driving the global oil and electricity marketplaces to benign, smaller, faster, cheaper, more-resilient and reliable choices. Those gloomy multiple choices your advisers threw at you are thus being eliminated because their high costs and financial risks repel investors. The risks of global warming will drop because these cheaper options save the most carbon per dollar and per year. (New nuclear plants would worsen the climate problem by saving two to 10 times less carbon per dollar, more slowly, than micropower and negawatts.) The risk of oil wars will also drop, since greater efficiency and the substitution of biofuels and saved natural gas for oil will eliminate petroleum's value as a strategic commodity. If we don't use oil, we won't need to fight over it, and we'll stop sending oil dollars to corrupt oligarchs, tyrants and terrorists. And nuclear pro-liferation will also become less of a threat. Dual-purpose nuclear technology - equipment, material and skills that can be used to make bombs or electricity - will become harder (and more detectable) to acquire once nuclear energy's failure to compete is recognized. You can smoke out proliferators even faster by helping all countries get access to nonviolent, abundant and cost-effective technologies - and by adopting them within the United States. The main obstacles to improving efficiency still further and speeding this process along are cultural and regulatory. Removing those hurdles will require your leadership and patient engagement with dynamic business leaders, innovative communities and resourceful citizens. But it needn't depend on Congress: a stroke of your pen, or state-level action, can introduce all the policies (such as feebates or rewarding utilities for cutting customers' bills) you need. That's not to suggest that taking action will be easy. But it'll be far easier and safer than the cramped and outmoded choices you're being offered, and the payoff will be huge. Almost all citizens will love it. Since the innovations will make money, they will cut across old political divides. If carbon- and plutonium-mongers try to stand in your way, just ask them a question: do they agree that all ways to save or produce energy should be allowed to compete fairly, at honest prices, regardless of their type, technology, location, ownership or size? If they say no, you can then out them as hypocritical corporate socialists in freemarketers' clothing. If they say yes, then you'll have won, because their favorite technologies (i.e., central power stations and oil) can't compete in free markets against efficiency, renewables and cogeneration. So with markets as your main tool, the people behind you and the smarter energy companies and much of the world cheering you on, you will be able to help the country lead the world to greater prosperity, safety and security.